false0001710155 0001710155 2019-08-06 2019-08-06

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 8-K

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CURRENT REPORT

Pursuant to Section 13 or 15(d) of the securities Exchange Act of 1934

Date of Report (Date Earliest Event report):

August 6, 2019

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National Vision Holdings, Inc.

(Exact name of registrant as specified in its charter)

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Commission file number 001-38257

Delaware				46-4841717
(State or other jurisdiction of incorporation or organization)				(I.R.S. Employer Identification No.)
2435 Commerce Ave.
Building 2200				30096
Duluth	,	Georgia		(Zip Code)
(Address of principal executive offices)

(770) 822‑3600

(Registrant’s telephone number, including area code)

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Check the appropriate box below if the Form 8−K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.42

☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common stock, par value $0.01 per share		EYE		Nasdaq

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.              ☐

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Item 2.02 Results of Operations and Financial Condition

On August 6, 2019, National Vision Holdings, Inc. (“National Vision”) issued a press release announcing financial results for the quarter ended June 29, 2019. A copy of the release is furnished herewith as Exhibit 99.1 and incorporated by reference herein.

The information in this Current Report on Form 8-K, including exhibits, is being furnished to the Securities and Exchange Commission (the “SEC”) pursuant to Item 2.02 of Form 8-K and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any of National Vision’s filings with the SEC under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01     Financial Statements and Exhibits.

(d)    Exhibits.

See the Exhibit Index immediately preceding the signature page hereto, which is incorporated herein by reference.

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EXHIBIT INDEX

Exhibit No.	Description
99.1	National Vision Holdings, Inc. Press Release dated August 6, 2019.
101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within Inline XBRL document
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.
104	The cover page of the Company’s Press Release on Form 8-K for the quarter ended June 29, 2019, formatted in Inline XBRL (included within the Exhibit 101 attachments)

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed by the undersigned hereunto duly authorized.

				National Vision Holdings, Inc.
Date: August 6, 2019		By:		/s/ Jared Brandman
		Name:		Jared Brandman
		Title:		Senior Vice President, General Counsel and Secretary

•	Net revenue increased 11.4% to $429.5 million

•	70th consecutive quarter of positive comparable store sales growth

•	Comparable store sales growth of 4.4%; Adjusted comparable store sales growth of 3.8%

•	Net income of $10.3 million; Adjusted net income increased 3.6% to $16.3 million

•	Adjusted EBITDA increased 7.2% to $49.8 million

•	Diluted EPS of $0.13; Adjusted diluted EPS was unchanged at $0.20

•	Reaffirms Fiscal 2019 Outlook

•	Net revenue increased 11.4% to $429.5 million from $385.5 million for the second quarter of 2018. Net revenue was positively impacted by approximately 40 basis points due to the timing of unearned revenue.

•	Comparable store sales growth was 4.4% and adjusted comparable store sales growth was 3.8% for the second quarter of 2019.

•	The Company opened 24 new stores, closed one store and ended the quarter with 1,128 stores. Overall, store count grew 7.4% from June 30, 2018 to June 29, 2019.

•

Costs applicable to revenue increased 14.4% to $202.5 million from $177.1 million for the second quarter of 2018. As a percentage of net revenue, costs applicable to revenue increased 130 basis points to 47.2% from 45.9% for the second quarter of 2018. This increase as a percentage of net revenue was primarily driven by increased net revenue from AC Lens contact lens distribution business growth and, to a lesser extent, higher optometrist costs that were partially offset by a higher mix of exam sales as a result of the Company's growing managed care business.

•

Selling, general and administrative expenses (“SG&A”) increased 10.1% to $182.3 million from $165.6 million for the second quarter of 2018. As a percentage of net revenue, SG&A decreased 60 basis points to 42.4% from 43.0% for the second quarter of 2018. This decrease as a percentage of net revenue was primarily driven by increased net revenue from AC Lens contact lens distribution business growth and store payroll leverage, partially offset by investment in advertising.

•	Net income was $10.3 million compared to $12.5 million for the second quarter of 2018. Diluted EPS was $0.13 compared to $0.16 for the second quarter of 2018.

•	Adjusted net income increased 3.6% to $16.3 million compared to $15.7 million for the second quarter of 2018. Adjusted diluted EPS was $0.20 per diluted share compared to $0.20 per diluted share for the second quarter of 2018. The net change in margin on unearned revenue benefited year-over-year adjusted net income growth by 460 basis points.

•

Adjusted EBITDA increased 7.2% to $49.8 million compared to $46.5 million for the second quarter of 2018. The net change in margin on unearned revenue benefited year-over-year adjusted EBITDA growth by 210 basis points. Adjusted EBITDA margin decreased to 11.6% from 12.1% for the second quarter of 2018, primarily due to investment in advertising and increased net revenues from AC Lens contact lens distribution business growth, partially offset by the net change in margin on unearned revenue.

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•	Net revenue increased 12.2% to $890.7 million from $793.5 million for the same period of 2018. Net revenue was negatively impacted by 50 basis points due to the timing of unearned revenue.

•	Comparable store sales growth was 5.4% and adjusted comparable store sales growth was 5.3%.

•	The Company opened 50 new stores, closed four stores and ended the quarter with 1,128 stores. Overall, store count grew 7.4% from June 30, 2018 to June 29, 2019.

•

Costs applicable to revenue increased 15.9% to $414.5 million from $357.5 million for the same period of 2018. As a percentage of net revenue, costs applicable to revenue increased 140 basis points to 46.5% from 45.1% for the same period of 2018. This increase as a percentage of net revenue was primarily driven by increased net revenue from AC Lens contact lens distribution business growth and, to a lesser extent, higher optometrist costs that were partially offset by a higher mix of eye exam sales as a result of the Company's growing managed care business.

•

SG&A increased 11.8% to $376.2 million from $336.3 million for the same period of 2018. As a percentage of net revenue, SG&A decreased 20 basis points to 42.2% from 42.4% for the same period of 2018. This decrease as a percentage of net revenue was primarily driven by increased net revenue from AC Lens contact lens distribution business growth, store payroll leverage and secondary public offering expenses incurred during the six months ended June 30, 2018 not recurring during the six months ended June 29, 2019, partially offset by investment in advertising and non-recurring management realignment and associated stock compensation expenses.

•	Net income was $27.7 million compared to net income of $36.9 million for the same period of 2018. Diluted EPS was $0.34 compared to $0.47 per share for the same period of 2018.

•	Adjusted net income increased 1.9% to $43.0 million compared to $42.2 million for the same period of 2018. Adjusted diluted EPS was $0.53 per diluted share compared to $0.54 per diluted share for the same period of 2018. The net change in margin on unearned revenue negatively impacted year-over-year adjusted net income growth by 450 basis points.

•

Adjusted EBITDA increased 5.5% to $113.1 million compared to $107.2 million for the same period of 2018. The net change in margin on unearned revenue negatively impacted year-over-year adjusted EBITDA growth by 240 basis points. Adjusted EBITDA margin decreased to 12.7% from 13.5% for the same period of 2018, due to investment in advertising, increased net revenue from AC Lens contact lens distribution business growth, and the net change in margin on unearned revenue.

•	The Company’s cash balance was $82.8 million as of June 29, 2019. The Company had no borrowings under its $100.0 million first lien revolving credit facility, exclusive of letters of credit of $5.5 million.

•	Total debt was $587.6 million as of June 29, 2019, consisting of outstanding first lien term loans and finance lease obligations.

•	Cash flows from operating activities for the first six months of 2019 were $119.3 million compared to $80.1 million for the same period of 2018.

•	Capital expenditures for the first six months of 2019 totaled $52.1 million compared to $48.7 million for the same period of 2018.

•	On July 18, 2019, the Company amended its credit agreement to establish new first lien term loans in an aggregate principal amount of $420 million ("Term A Loans") and a new revolving credit facility in the aggregate principal amount of up to $300 million, of which $148 million was drawn as of closing of the amendment.

•	The Company used the proceeds from the Term A Loans and the new revolving credit facility to repay all outstanding loans under the existing credit agreement.

•	The initial applicable interest rate margin is 1.50% for the new first lien LIBOR loans and the new revolving credit facility.

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(a)	Non-cash charges related to stock-based compensation programs, which vary from period to period depending on the timing of awards and performance vesting conditions.

(b)	Reflects write-off of property and equipment for the three and six months ended June 29, 2019.

(c)

Pre-opening expenses, which include marketing and advertising, labor and occupancy expenses incurred prior to opening a new store, are generally higher than comparable expenses incurred once such store is open and generating revenue. We believe that such higher pre-opening expenses are specific in nature and are not indicative of ongoing core operating performance. We adjust for these costs to facilitate comparisons of store operating performance from period to period.

(d)	Consists of the non-cash portion of rent expense, which reflects the extent to which our straight-line rent expense recognized under GAAP exceeds or is less than our cash rent payments.

(e)	Expenses related to our secondary public offerings for the three and six months ended June 30, 2018.

(f)	Expenses related to a non-recurring realignment of management described in the Current Report on Form 8-K filed with the SEC on January 10, 2019.

(g)	Expenses pursuant to a long-term incentive plan for non-executive employees who were not participants in the management equity plan. This plan was effective in 2014 following the acquisition of the Company by affiliates of KKR & Co. Inc. (the "KKR Acquisition").

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(h)

Other adjustments include amounts that management believes are not representative of our operating performance (amounts in brackets represent reductions in Adjusted EBITDA and Adjusted Net Income), including our share of losses on equity method investments of $0.4 million for each of the three months ended June 29, 2019 and June 30, 2018 and $1.0 million and $0.6 million for the six months ended June 29, 2019 and June 30, 2018 respectively; the amortization impact of the KKR Acquisition-related adjustments (e.g., fair value of leasehold interests) of $0.1 million and $52 thousand for the three months ended June 29, 2019 and June 30, 2018 and $0.2 million and $0.1 million for the six months ended June 29, 2019 and June 30, 2018, respectively; differences between the timing of expense versus cash payments related to contributions to charitable organizations of $(0.3) million and $(0.5) million for the three and six months ended June 30, 2018, respectively; costs of severance and relocation of $0.6 million and $0.3 million for the three months ended June 29, 2019 and June 30, 2018 and $0.8 million and $0.5 million for the six months ended June 29, 2019 and June 30, 2018, respectively; excess payroll taxes related to stock option exercises of $0.1 million and $56 thousand for the three months ended June 29, 2019 and June 30, 2018 and $0.1 million and $0.3 million for the six months ended June 29, 2019 and June 30, 2018, respectively; and other expenses and adjustments totaling $(31) thousand and $0.2 million for the three months ended June 29, 2019 and June 30, 2018 and $0.3 million and $0.2 million the six months ended June 29, 2019 and June 30, 2018, respectively.

(i)

Amortization of the increase in carrying values of definite-lived intangible assets resulting from the application of purchase accounting to the KKR Acquisition of $1.9 million for each of the three months ended June 29, 2019 and June 30, 2018 and $3.7 million for each of the six months ended June 29, 2019 and June 30, 2018. Amortization of deferred financing costs is primarily associated with the March 2014 term loan borrowings in connection with the KKR Acquisition and, to a lesser extent, amortization of debt discounts associated with the May 2015 and February 2017 incremental First Lien - Term Loan B and the November 2017 First Lien - Term Loan B refinancing, aggregating to $0.5 million and $0.4 million for the three months ended June 29, 2019 and June 30, 2018 and $0.9 million and $0.8 million for the six months ended June 29, 2019 and June 30, 2018.

(j)	Tax benefit associated with accounting guidance adopted at the beginning of fiscal year 2017 (Accounting Standards Update 2016-09, Compensation - Stock Compensation), requiring excess tax benefits to be recorded in earnings as discrete items in the reporting period in which they occur.

(k)	Represents the income tax effect of the total adjustments at our combined statutory federal and state income tax rates.

(l)

Reflects other expenses in (h) above, except for our share of losses on equity method investments of $0.4 for each of the three months ended June 29, 2019 and June 30, 2018 and $1.0 million and $0.6 million for the six months ended June 29, 2019 and June 30, 2018, respectively and facility opening expenses of $47 thousand for each of the three and six months ended June 30, 2018, which are non-SG&A expenses.

(a)

We calculate total comparable store sales based on consolidated net revenue excluding the impact of (i) Corporate/Other segment net revenue, (ii) sales from stores opened less than 13 months, (iii) stores closed in the periods presented, (iv) sales from partial months of operation when stores do not open or close on the first day of the month and (v) if applicable, the impact of a 53rd week in a fiscal year. Brand-level comparable store sales growth is calculated based on cash basis revenues consistent with what the CODM reviews, and consistent with reportable segment revenues presented in Note 9. “Segment Reporting” in our unaudited condensed consolidated financial statements included in Part 1. Item 1. in our Quarterly Report on Form 10-Q, with the exception of the legacy segment, which is adjusted as noted in clause (c) (ii) below.

(b)

As a result of changes in applicable California law, certain optometrists employed by FirstSight Vision Services Inc. (“FirstSight”) were transferred to a professional corporation that contracts directly with our legacy segment in the fourth quarter of 2018, similar to optometrist transfers that occurred in the third quarter of 2017. Incremental eye exam revenue as a result of these changes in operations at FirstSight drove a favorable impact to comparable store sales growth in the Legacy segment of approximately 180 basis points and 195 basis points for the three months ended June 29, 2019 and June 30, 2018 and 185 basis points and 200 basis points for the six months ended June 29, 2019 and June 30, 2018, respectively.

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(c)

There are two differences between total comparable store sales growth based on consolidated net revenue and adjusted comparable store sales growth: (i) adjusted comparable store sales growth includes the effect of deferred and unearned revenue as if such revenues were earned at the point of sale, resulting in a decrease of 0.4% and 1.5% from total comparable store sales growth based on consolidated net revenue for the three months ended June 29, 2019 and June 30, 2018, respectively, and an increase of 0.2% and a decrease of 1.0% from total comparable store sales growth based on consolidated net revenue for the six months ended June 29, 2019 and June 30, 2018, respectively, and (ii) adjusted comparable store sales growth includes retail sales to the legacy partner’s customers (rather than the revenues recognized consistent with the management & services agreement with the legacy partner), resulting in a decrease of 0.2% and 0.1% from total comparable store sales growth based on consolidated net revenue for the three months ended June 29, 2019 and June 30, 2018, respectively, and a decrease of 0.3% from total comparable store sales growth based on consolidated net revenue for the six months ended June 29, 2019.